July 15 (Reuters) – Citigroup posted a 27% drop in second-quarter profit on Friday due to higher provisions for risk of loan losses as well as a slump in its investment banking business.
The profit of the third American bank thus fell to 4.5 billion dollars (as many euros), or 2.19 dollars per share, during the quarter ended June 30, against 6.2 billion dollars, or $2.85 per share, a year earlier.
The drop, however, is smaller than expected, with analysts on average expecting earnings of $1.66 per share, according to data from Refinitiv IBES.
The US bank provisioned an additional $375 million in the quarter in the face of growing recession risks. A year ago, the US government’s stimulus measures and the recovery of the economy from the coronavirus pandemic had allowed the bank to release $2.4 billion from its reserves.
Fears of a US recession have intensified in recent months as sustained inflation has prompted the Federal Reserve to raise interest rates sharply, increasing market volatility.
Market difficulties have also reduced the underwriting and advisory fees of investment banks, from which Wall Street brands had benefited during the health crisis. Citigroup saw its investment bank’s revenues drop 46% to $805 million during the quarter.
Revenue from the trading business, however, jumped 25% to $5.3 billion as Citi benefited from volatility in assets, particularly bonds, commodities and currencies.
Treasury and trading (TTS) revenue jumped 33% to $3 billion, driven by higher net interest income and fee growth. (Reporting Mehnaz Yasmin and Niket Nishant in Bangalore and David Henry in New York; French version Diana Mandiá, editing by Kate Entringer)